Data Storage (DTST) Q3 2024 earnings summary

Executive summary

• Achieved $5.81 million in Q3 2024 revenue, a 3% year-over-year decline, reflecting a shift to high-margin recurring subscription revenue over one-time sales.

• Maintained profitability for Q3 and the nine-month period, with net income of $122,000 for Q3 and $235,000 for nine months, despite lower one-time sales.

• Expanded into high-growth, regulated sectors (insurance, healthcare, education) with new contracts and partnerships, and strengthened U.S. and U.K. infrastructure, including new data centers and leadership appointments.

• Continued focus on subscription-based services, international expansion (notably the UK and EU), and cross-selling following the merger of CloudFirst Technologies and Flagship Solutions.

• Cash and marketable securities totaled $11.9 million as of September 30, 2024, with no long-term debt.

Financial highlights

• Q3 2024 revenue: $5.81 million (down 3% year-over-year); nine-month revenue: $19.0 million (up 1% year-over-year).

• Gross profit margin improved to 43.2% in Q3 2024 from 38.9% in Q3 2023; Q3 gross profit was $2.51 million, up 8% year-over-year.

• Adjusted EBITDA for Q3 2024: $515,000, up from $486,000 in Q3 2023; nine-month adjusted EBITDA: $1.4 million.

• Net income for Q3 2024: $122,000 (down from $179,000 prior year); nine-month net income: $235,000 (down from $456,000 prior year).

• Ended Q3 2024 with $11.9 million in cash and marketable securities, and working capital of $11.6 million.

Outlook and guidance

• Projected recurring revenue for 2025 expected to exceed $20 million, with baseline revenue estimated at $21 million, including $5–6 million in software/hardware renewals and $2–2.4 million in managed services.

• Renewal rates estimated at 92% for revenue and 94% for clients, with cloud services margins around 60%.

• Built-in contract price increases up to 10% on renewals, supporting revenue growth.

• Management expects continued positive EBITDA from subsidiary operations and is focused on international expansion, particularly in the UK and EU, with new data center agreements commencing in 2025.

• Strategic investments in infrastructure and international expansion are expected to drive future growth and broaden market impact.